Chapter 2 Flashcards
(17 cards)
In the circular-flow diagram,
households are sellers in the markets for the factors of production.
Which of the following steps does an economist take when studying the economy?
devise theories, collect data, analyze data, verify theory
A statement describing how the world should be
is a normative statement
In the circular-flow diagram, which of the following items does not flow from firms to households?
capital
In the simple circular-flow diagram,
-land, labor, and capital flow from households to firms.
-households buy all the goods and services that firms produce.
-households own the factors of production.
ALL OF THE ABOVE ARE CORRECT
In the simple circular-flow diagram, who buys the factors of production?
firms only
Any point on a country’s production possibilities frontier represents a combination of two goods that an economy
can produce using all available resources and technology.
Economists make assumptions to
focus their thinking on the essence of the problem at hand.
Which of the following statements about economic models is correct?
-Economic models are built to mirror reality exactly.
-Economic models are useful, but they should not be used for the purpose of improving public policies.
-Because economic models omit many details, they allow us to see what is truly important.
-Economic models seldom incorporate equations or diagrams.
-Because economic models omit many details, they allow us to see what is truly important
Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that
the nation is not using all available resources or is using inferior technology or both.
A production possibilities frontier can shift outward if
there is a technological improvement
Unemployment would cause an economy to
produce inside its production possibilities frontier.
A production possibilities frontier shifts outward when
the desires of the economy’s citizens change.
Unemployment would cause an economy to
produce inside its production possibilities frontier.
One thing economists do to help them understand how the real world works is
make assumptions
Economists face an obstacle that many other scientists do not face. What is that obstacle?
It is often impractical to perform experiments in economics.
For economists, substitutes for laboratory experiments often come in the form of
natural experiments offered by history
